Continuity concept, Accounting Basics

Assignment Help:

Accounting supposes that the business as an accounting entity will continue to operate for a long time in the future, unless there is superior evidence to the contrary. The enterprise is seemed as a going concern, which is as continuing in operation, in any case in the foreseeable future. The owners have no purpose, nor have they the requirement to wind up or liquidate its operations.

This assumption is of considerable significance, for it implies that the business is looked as a mechanism for adding value to the resources it uses. The success of the business can be measured through the difference between output values as sales or revenues and input values as expenses. Thus, all unused resources can be reported at cost quite than at market values as, as per to the continuity concept, the future instead of selling them out rightly in the market.

The assumption about the business is not expected to be liquidated in the foreseeable future, actually establishes the basis for a lot of of the valuations and allocations in accounting. For illustration, depreciation or amortization procedures rest on this concept. This is this assumption that underlies the decision of investors to commit capital to enterprise. The notion holds that continuity of business activity is the sensible expectation for the business unit for that the accounting functions is being performed. Merely on the origin of this assumption can the accounting process continue stable and attain the objective of correctly recording and reporting on the capital invested, the position of the enterprise and the efficiency of management as a going concern. In this assumption neither liquidation values nor higher current market values are of particular importance in accounting. This assumption gives a origin for the application of cost in accounting for assets.

Though, if the accountant has good reasons to believe that the business, or a few part of it, is going to be liquidated, or which it will cease to operate as like in a year or two, then the resources could be reported on their recent values or liquidation values.


Related Discussions:- Continuity concept

Explain about long-term assets, Q. Explain about Long-term assets? Long...

Q. Explain about Long-term assets? Long-term assets are assets that a business has on hand or else uses for a relatively long time. Examples include plant, property and equipme

A good purchased for $480 sells for $700, A good purchased for $480 sells f...

A good purchased for $480 sells for $700. If the store's operating expenses are 30% of cost, what is the percentage markup on cost? A. 1.5% B. 10.57% C. 15.83% D. 4

Exchange-price or cost principle, Q. Explain about Exchange-price or cost p...

Q. Explain about Exchange-price or cost principle? When resources are transferred between two parties such like buying merchandise on account the accountant must follow the exc

Example of current ratio, Q. Example of current ratio? The current asse...

Q. Example of current ratio? The current assets and current liabilities and current ratios of some other companies as of the third quarter of 2001 were As you are able to se

As part of their divorce agreement, As part of their divorce agreement , Ha...

As part of their divorce agreement , Harry transfers to Mary, his former spouse, GM stock with a market value of 30000, Harry had $20000 invested in the stock. How does this transf

What is sales allowance, Q. What is sales allowance? A sales allowance ...

Q. What is sales allowance? A sales allowance is a inference from the original invoiced sales price granted when the customer keeps the merchandise but is dissatisfied for any

Define accounting and briefly explain the accounting concept, 1. (a) Define...

1. (a) Define Accounting. Briefly explain the accounting concepts which guide the accountant at the recording stage. (b) "Ledger is said to be the principal book entry and the t

What do you mean by supplies on hand, Q. What do you mean by Supplies on ha...

Q. What do you mean by Supplies on hand? Supplies on hand approximately each business uses supplies in its operations. It may classify supplies merely as supplies to include al

Identify the errors, Company A has only been in existence for two full year...

Company A has only been in existence for two full years as a public company. Prior to this, it was a segment of large multinational and was spun off as stand-alone, public company.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd